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Oct 18, 2017 08:20 AM GMT+0530 | 0 Comment(s)

ECONOMYNEXT - Sri Lanka's businesses are developing an alarming tendency to curb economic freedoms of others, especially among the youth as labour markets tighten, Anushka Wijesinha an economist who works closely with businesses said.

Sri Lanka's export manufacturing sector has unfilled vacancies.

The policy-making elite in the current administration are keen to drive young people to the factory floor, due to an obsession with manufacturing rather than services, somewhat similar to the sentiments displayed in Europe by agrarianists, during its industrialization period analysts say.

"At meetings this week on finalizing the national export strategy, several industries complained of a shortage of workers," Wijesinha, who was Chief Economist at Ceylon Chamber of Commerce told a forum organized by Advocata Institute, a Colombo-based free market think tank and Fraser Institute of Canada, which compiles a global index of economic freedom.

"And all of them seem to have this one fantastic solution for it, and are adamant that it is the solution. We must stop them all from becoming three wheel drivers…"

The demand is being filled by three wheelers where a free market exists. Innovative solutions like call centres, and even a ride-sharing apps have popped up, with standard taxis being too expensive due high state taxes on cars.

Owning a three-wheeler also gives the driver and his family mobility. 'Dropping the kid off at school' is no longer privilege limited to the upper classes.

"Many are placing a premium on flexibility than a steady job; many are discounting future earnings and are taking an unorthodox approach," he said.

"Many are also having, what economists call a high reservation wage, where they would rather work as a three wheeler driver at that level of income than going for a manufacturing job.

"The challenge is that whilst this is the problem, too many folks I know think that the solution is to ban them from becoming three wheel drivers, or worse, curb the three wheel population as a whole."

Wijesinha said while three-wheelers created some problem, they were invaluable deep in rural areas, where people were now getting to hospital and transporting goods and people cheaply and fast because of them.

"I think this is a classic economic freedom issue that is being highlighted here," he said. "Of course, I’ll be the first person to admit that there are many three wheel drivers who drive like crazy people in the city."

He said the tendency was also seen in the information technology sector, where he took part in a policy development meeting and participant suggested that the migration of Sri Lanka information technology graduates must be stopped because there is too much "brain drain".

"I think a lot of us were rather alarmed to hear this from the industry," he said. "Sri Lanka’s IT sector is growing, has great potential, IT sector is constrained by the limited skill pool, a lot of IT people getting educated here and leaving, so this must be stopped.

"But I think the economic freedom implications of this are rather serious."

Wijesinha said such positions were inherently contradictory.

"I found it interesting that we want to attract migrants from other countries to fill our skill gap, but at the same time we want to curb our young people from seeking opportunities overseas," he said.

"..[B]ut the thinking that was expressed, for me, was alarming.

"These areas I think are areas of tensions or contradictions in economic thinking where I think an economic freedom lens needs to come in quite strongly and Advocata [Institute) can help to shape that debate."

Wijesinha also said many think people's freedom to import goods should also be curbed. This was an idea was prevalent in both public and state sectors.

"We often here about the desire to promote exports as an important strategy of attaining faster growth and achieving greater prosperity," he said.

"Yet we often here about the desire to curb imports- exports good, imports bad.

"Whether it’s in the public sector or in the private sector, I’ve heard few people explore the virtues of imports.

"Their idea of economic freedom is that we must export as much as we can but prevent imports as much as we can too.

"We must recognize that exports and imports are two sides of the same coin."

That trade deficits are bad is an old Mercantilist concept, before the birth of economic proper as a logical philosophy. Mercantilists in general sought to make profits by controlling the freedom of others.

However the concept of economic freedom is based on the principle that no one should be able to curb the freedom of others, and everyone had the right to life, property and liberty.

Mercantilism became widespread in Asia with the Dutch East India company and later the British East India company. Though they were dismantled during the latter part of British rule also with slavery, trade controls on citizens came back after independence and the creation of a central bank.

Mercantilist could not understand that flow of specie (gold and silver) at the time came from credit expansion and not trade deficits.

In Sri Lanka foreign exchange shortage are associated with imports rather a necessary function of central bank money printing and credit booms, though some light in beginning to dawn now.

In the Fraser Institute economic freedom index Sri Lanka scores equally and badly on sound money (the ability of the central bank to deliver low inflation money) and trade, at the 135 worst country among 169.

Central Bank money printing and currency depreciation also generates both brain and brawn drain, as people try to counter their real wages being erode by moving to countries with sounder money. (Colombo/Oct16/2017)